Bitcoin bearish phase to continue even as derivatives and ordinals data reveal positive trading activity

Pic Credit: Trading View

The five-day BTC chart displays that while the bears may be enjoying an extended phase, the bulls might prevail in the long run. The current bearish rally shows signs of exhaustion and Bitcoin derivatives and ordinals data also confirm a bullish outlook in the near future. The market seems to be waiting for a trigger to start a bullish rally soon. 

Given the enormous liquidation of over $1 Billion, the price of Bitcoin is likely to fall between $24k to $23.5k. A 10–20% market recovery from that liquidation level can be anticipated from market data. Many traders were caught off guard by the recent 11.4% decline from $29,340 to $25,980 between August 15 and August 18, which triggered the worst liquidation ever since the FTX collapse last year.

On Twitter, leading trading analyst Michael van de Poppe voiced his opinion regarding an extended bearish phase for BTC. He tweeted, “Bitcoin dominance continues to fall after retesting the 200-Week MA and EMA. This downward fall might continue in the coming months, through which Altcoins outperform Bitcoin. Thesis wrong if reclaim 200-Week MA & EMA.” 

A glance at the derivatives market data can be pretty helpful to gauge the effects of the decline to $26,000 level. It can reveal if market makers and whales have switched to a negative stance or whether they are now seeking larger prices for protective hedge positions. When compared to spot markets, Bitcoin quarterly futures often trade at a little premium. This demonstrates the sellers’ desire to be compensated more for postponing the settlement. BTC futures contracts typically trade with an annualised premium between 5 and 10% in thriving markets. The 11.4% BTC crash that occurred between August 15 and August 18 shows that the starting point for the premium on Bitcoin futures was greater and exceeded the 5% neutral level. 

With the indicator at -11%, data show that there was an overwhelming demand for call (buy) BTC options before to the crash on August 15. Over the next five days, this trend shifted, but the metric stayed within the neutral range and was unable to cross the 7% threshold. Data for Bitcoin futures and options show no evidence of professional traders taking a pessimistic stance. BTC may not immediately rebound to the $30,000 support level, but this does lessen the risk of a protracted price fall.

Despite the recent decrease in the value of cryptocurrencies and rumours that the excitement surrounding Bitcoin NFTs has subsided, ordinals have remained the main source of activity on the Bitcoin network during the past week. The trend is supported by data from Dune Analytics, which shows that on August 20, there were more than 400,000 ordinal inscriptions.

This indicates that on August 20, there was activity on the network that was related to the Ordinals to a greater extent than 75%. 

Following the Bitcoin Ordinal protocol’s introduction in January 2023, the inscription buzz took off as hundreds of Ordinals were produced on the Bitcoin network. Congestion and transaction price increases resulted from this, reaching a climax in April and May.

Disclaimer: This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.

Author: Puskar Pande

Leave a Reply